Chapter 10 Fall2007

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The Order Entry / Sales (OE/S) Process:

This chapter explores in detail the OE/S process. We will examine managerial decision making perspectives concerning this process; technologies available to support this process; and various models of this process (DFD's, ERD's, and system flowcharts). Finally the chapter will explore The Control Metric for this process.

Order Entry / Sales Process Activities:

  • Pre-Sales Activities
  • Sales Order Processing
  • Picking and Packing Goods
  • Shipping

Order Entry / Sales Process Information Flows:

Order Entry/Sales Process Information flows support the following:
1. Repetitive work routines of the sales order, credit, and shipping departments. Information flows horizontally by capturing, storing, and communicating the sales data.
2. Decision needs of sales and marketing managers. Information flows vertically in summarized form to managers of the various departments.

Horizontal Information Flows (9), please describe them:
  • Customer places order. This may be done via a phone call, a mailed customer order form, or a website order.
  • Sales Order Dept. requests credit approval from the credit dept.
  • Credit Dept. informs sales order dept. of disposition of credit request. This credit check could take various forms, for example, looking up the customer's master data.
  • Sales Order Dept. acknowledges order to the customer. This may be done through a phone call/ website by giving the customer a confirmation #.
  • Sales Order Dept. notifies shipping dept. of sales order. This may take the form of a copy of the sales order or a image on a computer.
  • Sales Order Dept. notifies warehouse and B/AR/CR process of shipment. The warehouse "picks" the goods once a picking ticket is received. The B/AR/CR Dept. is sent a sales order copy notifying them that a shipment (invoice) is pending.
  • Warehouse sends (completed) picking ticket to shipping dept. along with the goods picked.
  • Shipping Dept. informs sales order dept. of shipment. A shipping notice is prepared after the sales order & (completed) picking ticket have been matched.
  • Shipping Dept. informs carrier, B/AR/CR process, and general ledger process of shipment by sending a shipping notice. The carrier is informed of the destination and goods to be shipped. After matching the shipping notice to the sales order sent earlier, the B/AR/CR dept. can now begin billing the customer(s).The general ledger dept. now can decrease inventory and increase COGS.

Vertical Information Flows, explain:
Vertical information flows deal with managerial decision making.
A marketing perspective is helpful in analyzing vertical information flow:
  • Sales related information is captured through the sales order department and then flows vertically to management to aid them in making decisions.
  • This information is mainly focuses on customers and concerns their preferences, needs, and some key demographics
  • Information technology including ERP and Data warehousing aid vertical information flow

Technologies Supporting OE/S Process:

    • Data Warehousing - collecting computerized data and organizing in a way that primarily serves analysis and reporting functions. The purpose of the data warehouse is to improve decision making by providing users with a access to large quantities of data. Data warehouses are considered to support online analytical processing (OLAP), which means that no transactions are posted to data warehouses, but they are used to analyze data, not record it.
    • Data Marts - Specialized versions of data warehouses. Data marts are just smaller, more specialized versions of data warehouses. Data marts were first developed by the merchandiser Lands' End because their employees were intimidated by working with data warehouses. So the company employed the use of data marts for each of their functional areas such as marketing, etc.
    • Data Mining- tool used to aggregate, explore, and analyze large quantities of data. It is used to understand an organization's business processes, trends within the business processes, and opportunities for improvement. Data Mining helps to assist users in crunching data to find statistical relationships between data.
    • E-Business- used to penetrate global markets by allowing easy ordering without a physical presence
      • Buy-side- the internet is used to automate and manage vendors and purchases- supply chain management software helps to facilitate the purchasing cycle.
      • Sell side- use the internet to market, sell, deliver, and provide services to customers. Customer relationship management systems are key in this business cycle. The buyer/customer ultimately dictates what technology will be used for this process (reason: if customers don't like the technology, they won't buy the product).
    • Customer Relationship Management ([[../../Chapter2 GSH#CRM|CRM]]) Systems - these systems focus on key demographics concerning customers. The historical way of targeting customers was through segmenting the markets and then customizing a market plan for each segment. CRM systems hope to narrow these segments to what would ultimately be the smallest segment: the individual customer. The goal is to retain customers by providing service and meeting their changing requirements. Sometimes CRMs have the feature customer self-service. This feature allows customers to access information or perform a task without one of the organization's employees.
      • SAP - which is the leading ERP software program has its own CRM feature. The software basically works in the following way (from SAP website):
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    • Automated Data Entry:
      • Bar Code Readers - uses light reflected from line patterns to recognize and input items, most widely used in grocery and department stores, but also in use to keep track of inventory in warehouses.
      • Optical Character Recognition - uses pattern recognition to input data in the computer
      • Scanners - capture images for electronic storage and later retrieval.

Narratives of the OE/S Process:

    • Write narratives for each of the models provided in chapter 10 starting with:
    • OE/S Process Context Diagram:
      • A customer submits and order to an organization. The organization gives back a customer acknowledgement. A sale order notification is then sent to B/AR/CR. A general ledger inventory sales update is sent as a result of the OE/S process to the General Ledger process. A completed packing slip and bill of lading sent to the carrier. Finally, a shipping's billing notification is sent to B/AR/CR.
    • OE/S Process Level-0 Diagram
      • The bubble in the context diagram is subdivided into 3 main processes of the OE/S Process. The number of inputs and outputs are identical to the context diagram which is an important checklist to make sure that a process is not inadvertenly left out.
      • A customer order comes in. The order is validated by retrieving information from the AR master data, the Inventory master data, and the customer master data. Once the order is validated, an acknowledgement is sent to the customer and the information is sent to the marketing data. The sale order is created in the sale order master data. The picking ticket is sent to the completing picking ticket process and the sales order notification is sent to the B/AR/CR. The Picking ticket is completed and the document is sent to the shipping process. The shipping's billing notification is sent to B/AR/CR. The sales order master data and inventory master data are updated. The bill of lading and packing slip is sent to the carrier and the general ledger inventory sales update is sent to the general ledger process.
    • OE/S Process Level-1 (process 1) Diagram:
        • Error routines are not shown in Context Diagrams but are shown in the Level 1 DFD and below.
      • Validate Sales Order (Page 342).
    • The customer order is entered into the system and the system pulls the inventory master data to check for availability of the item requested. If the item is not available, a back order or reject process is initiated depending upon the reorder plans for that item, or if the item ordered is not available at all. The marketing data master file is updated with the customer order information. If the items are available in stock, the order is sent to the credit department for a credit check. The customer master data, accounts receivable master data and sales master data is pulled to review the customer credit profile and account status. If the customer credit is rejected, the sales order is not processed and an error routing is initiated. If the customer credit is approved, the order is processed by the system. The sales order master file data is updated, a picking ticket with the items ordered and relevant shipping information is printed and sent to the warehouse. Also, a customer acknowledgement and sales order notification are prepared and sent.

    • OE/S Process Level-1 (process 2) Diagram:
      • Check Customer's credit 1.2 (Page 342).
      • After inventory availability has been established, the customer's credit is verified. Credit can be checked in various ways. A very simple approach would be to compare the value of the goods plus other open sales orders plus accounts receivable balances (accounts receivable master data)to the customers credit limit (customer master data). If the customer is in good standing, this process updates the inventory master data to reduce the inventory for the amount on the order. The sales order master is updated to indicate that a completed sales order has been created. A completed sales order is disseminated. If the customer has inadequate credit, the sale is rejected and the customer is notified.
    • OE/S Process Level-1 (process 3) Diagram:
      • Complete Sales Order 1.3 (page 342).
      • A picking ticket is sent to the warehouse to authorize the staff to pick specific goods from the shelf and send them to shipping. A customer acknowledgment is sent to the customer to notify him of the order's acceptance and the expected shipment date. A sales order notification is sent to the billing department to notify them of a pending shipment.
    • OE/S System Flowchart:

    • Describe the data structures from the ERD model provided in chapter 10:
      • Customer Master Data - Contains a record of every customer with whom the Company is authorized to regularly do business. Each record includes a unique customer number and data that identify the particular charactistics of each customer, such as name, address, telephone number, industry, etc. It also stores credit data. Proper control techniques require that all such master data changes be documented, approved, and executed by someone other than the individuals who create sales orders, and that a report of all data changes be printed and reviewed periodically.
      • Inventory Master Data - Contains a record of each item that is stocked in the warehouse or is regularly ordered from a vendor. The records are used to manage inventory, and they are a subsidiary ledger for the inventory account in the general ledger. Each record includes a unique item number, unit of issue, weight, volume, warehouse location, price, cost, etc.
      • Marketing data - The data includes census reports, customers buying preferences, demographics of customers, and sales orders that have been processed. The CRM system maintains this type of data. (not included in ERD model, but this is still a data store)
      • Sales Order Master Data - The data is created on the completion of a sales order. After the goods are shipped, the sales order record is updated. The sales order master data may include the time and date of picking, packing, and shipment of goods and who completed each step.

Additional Control Plans for the Order Entry/Sales Process
  • Customer Credit Check -- This is important because if the company sells to someone who is not creditworthy, they will have to write-off bad debts in the future, which will reduce profitability.
  • Independent Shipping Authorization – someone other than the warehouse personnel authorized the shipment
  • Independent Customer Master Data Maintenance – separation of duties between the person who creates customer records and the person who is creating sales orders.
  • Open Sales Order (Tickler File) – to ensure all sales orders are processed in a timely manner. The tickler file is created in order to know which sales order are still pending and need to be addressed. It is like a follow up file.